The National Association of Home Builder’s (NAHB) Spring Construction Forecast showed that multifamily starts are projected to continue at a healthy pace as expected. According to David Crowe, chief economist and senior vice president for NAHB, the single family housing market is slowly beginning to recover, but not fast enough to make a dent in the rental market quite yet.
“Multifamily continues to do almost unbelievably well. I do see the need to be a renter instead of a homeowner because of the high costs of down payments and credit difficulties,” said Crowe. “That’s why we’ll continue to see a higher percentage of renters. But I do think that’s only transitional,” he added.
Crowe mentioned that nearly all the newly formed households have been renters and pointed to sluggish job growth as a culprit for a slow single family recovery. In fact, he believes that it will be a long, slow road back to normal for single family construction, but it inevitably will occur. NAHB’s forecast for single family starts in 2012 is 506,000, or a 17 percent increase from last year. The prediction for 2013 is an optimistic 660,000, still nowhere close to 2005 levels. But the report suggests single family will have a “decent” sales market in 2013, though nowhere close to being great once again, even though the numbers are on an upswing.
The report also showed that multifamily starts continue to ride a tailwind, with an increase of 55 percent in 2011 compared to 2010. And it called for a 22 percent increase in 2012, with 216,000 new starts predicted by year’s end. Better yet, that number is projected to jump to 235,000 in 2013. Crowe expects that the multifamily market will best that number consistently in the years ahead. “I’d say between 350,000 and 400,000 is a pretty stable average for multifamily starts we will probably see moving forward,” said Crowe.
The consensus was that until the economy can create a meaningful recovery, new starts will only see modest increases in single family. But multifamily should keep growing at a rapid clip. The NAHB is optimistic that the single family market is due to recover, eventually, but a lot of economic factors will need to fall into place first. The desire to be a homeowner is still alive, but the means to achieve it are still missing.
“It centers around a new generation’s ability to get credit, not their desire to become a homeowner,” said Crowe.